Print edition: 
Boeing’s announcement that its Wichita plant would close, eliminating more than 2,000 Kansas jobs, sent shock waves across the state. Beyond the immediate threat to Kansas’ well-being, the closure shows the challenges of state governments as job recruiters and retainers.
State incentives for businesses to locate or stay are common but risky. Few companies know as well as Boeing, whose founder threatened to move the company from Washington state to California in the 1920s until Seattle offered to construct an airfield specifically for the aircraft builder. More recently, South Carolina and Illinois joined Washington in offering billions of dollars in tax incentives to Boeing, either to retain it or secure the company’s production inside their borders.
States and localities are regularly in competition with one another for scarce jobs. However, a 2001 article in Economic Development Quarterly reported that, despite the billions distributed annually as incentives, states were doing little evaluation of incentives’ effectiveness or their return on investment.
The result has been a constant chase where states desperate to add jobs throw generous packages at companies that, like Boeing, have no natural connection or loyalty to the state in which they locate and no disincentive to chase other, better deals.
Businesses are thus placed in a powerful leverage position over governments. The threat to leave or promise to expand is a common tactic businesses use to sweeten existing deals, effectively extorting concessions from the state to keep their jobs and hopefully increase them. That approach was evident when Boeing asked for grassroots lobbying help from Kansans while trying to land a government tanker contract. Boeing claimed it could bring more than 7,000 jobs and hundreds of millions of dollars to Kansas if it got the contract, causing Sen. Pat Roberts, R-Kan., and many everyday Kansans to put pressure on the federal government to grant Boeing the contract.
Boeing got its contract, but now claims federal defense cutbacks are forcing it to move current Wichita jobs elsewhere.
Gov. Sam Brownback is trying to soften the blow of Boeing’s departure through a deal with Bombardier Learjet that promises a few hundred jobs in exchange for $16 million in tax incentives, and none of the safeguards that would prevent a Boeing-type departure from occurring. The plan is a risk, but one seen as necessary to ameliorate the Boeing damage.
When the states have their hands tied, businesses return to the dominant position. State Rep. Jim Ward, D-Wichita, said after the Boeing announcement that “we will be less trusting in the future of corporate promises.”
But can we be? Every state does the tax-incentive dance. Like free-agent baseball players, businesses will follow the best deals they can arrange.
No state will abandon the tax-incentive recruitment strategy for fear of being the only business suitor with nothing to offer. But the tax-incentive strategy remains a risky one, and perhaps it is time for Kansas and other governments to re-evaluate the practice.
